Celsius’s DeFi division, CelsiusX, aims to bridge the gap between CeFi and DeFi by building the right infrastructure. One of its initiatives is to create a wrapped token platform that unlocks cross-chain liquidity between otherwise isolated blockchains.
Challenge: Building a cross-chain wrapped token platform
Developing this type of wrapped token platform faces several challenges:
- Preventing the creation of unsupported or fraudulent tokens
- Ensuring correct minting, burning and redemption of wrapped tokens
- Providing verifiable audits based on cryptographic proofs
- Replacing traditional manual audits with automated checks
- Allowing users to independently verify the collateral backing wrapped tokens
Due to the inherent connectivity limits between different blockchains, ensuring that wrapped tokens remain fully collateralized has been difficult. Relying on manual audits and centralized intermediaries introduces centralization risks and creates operational bottlenecks that can harm efficiency and trust.
Chainlink PoR as the solution
Celsius integrated Chainlink Proof of Reserve (PoR) to leverage automated, transparent, on-chain, real-time checks instead of long, opaque audits. Chainlink provides a decentralized network of nodes to avoid a single point of failure and to deliver tamper-resistant data feeds to smart contracts.
PoR operates autonomously, improving the system’s resilience. With this integration, Celsius can reliably manage the minting, burning and redemption of wrapped cross-chain tokens while maintaining verifiable collateralization.
Alex Mashinsky, founder and CEO of Celsius Network, commented:
As a core infrastructure layer for the Web3 ecosystem, Chainlink is the right solution to integrate when building cross-chain bridges.
How to deposit wrapped ADA onto Polygon
To begin minting, ADA tokens are first deposited into Celsius’s staking wallet on Cardano. A Chainlink PoR data feed on Ethereum then verifies those balances and triggers the minting of cxADA tokens on Ethereum that represent the corresponding amount of ADA on Cardano.
Once minted, those cxADA tokens can be managed or held in a secured Enzyme vault system on Ethereum.
Verified token balances on Ethereum
Chainlink PoR smart contracts continuously check vault token balances on Ethereum. To maintain a 1:1 collateralization ratio, Chainlink PoR mints the equivalent amount of cxADA tokens on Polygon.
The system also monitors for undercollateralization and will burn cxADA tokens if the vault balance falls short or when users redeem cxADA to withdraw ADA on Cardano, ensuring that token supply matches actual reserves.
Celsius can use PoR as a fail-safe
Celsius can configure PoR-based checks as a gatekeeper to ensure wrapped tokens are minted only when vault reserves are sufficient. That approach strengthens trust minimization by adding an automated, verifiable layer of protection between the custodial reserves and the wrapped token supply.